Page 258 - 2017 White Paper
P. 258
7 White Paper on the Business Environment in China
hugely beneficial for west coast port communities such witnessed explosive growth in recent years” (China Daily
as Los Angeles. As reported in the New York Times in 2007, 2011).
“processing and distributing millions of freight-laden
containers through the region and out to the rest of the More recently, Wal-Mart Asia president and CEO
United States have become the largest source of jobs in Scott Price also fingered China’s inefficient logistics
the region” (Flanigan 2007). infrastructure as the biggest challenge to e-commerce in
the nation, first and foremost “stemming from the lack of
Fuel costs, however, remain a persistent concern for efficient and reliable last-mile delivery” (Xinhua 2012a).
the industry as a whole. It was reported in September
2008 that as a result of the 18 percent increase in diesel On top of that, the State Post Bureau reportedly
and gasoline prices in August of that year, fuel spending enforced its first-ever fine for parcel mishandling against
accounted for 40 percent of total transportation costs. domestic carrier Shentong Express after a video was
Domestic Chinese courier companies, already operating posted online of “workers furiously distributing goods,
on extremely thin margins due to competition with “tens kicking parcels and throwing items to the ground”. The
of thousands of local competitors offering increasingly fine was for 10,000 yuan (approximately $1,500) (Li 2011).
lower charges” have reportedly suffered greatly (China
Daily 2008). More severe punishments have since been handed out:
“[In November 2012], the China Air Transport Association,
Despite fuel cost fluctuations, capital cost hikes, and or CATA, announced it was putting four domestic logistics
potential setbacks contained in the 2009 revision of the firms on its no-fly list because of security flaws, after a fire
Postal Law (see below), many participants in the sector started in a storage bin of a flight that eventually landed
remain optimistic about growth, and with good reason: at Dalian Zhoushuizi Airport in October” (He 2012).
according to the National Bureau of Statistics, between
2002 and 2008 (the last year for which data was available) The four firms, Shanghai YTO, Yunda Express, and
total freight volume has increased from 14.8 billion to 25.8 the Huixing and Qihao courier firms were “forced to
billion tons annually (The National Bureau of Statistics of suspend their air freight services until their business
China 2009). procedures improved”. According to the association,
“Shanghai YTO was blamed for its incorrect classification
Xinhua reported that the total value of goods shipped of lithium batteries, while the other firms were punished
over the first half of 2011 rose by nearly 14 percent for transporting the prohibited article vesuvian, which
year-on-year to reach 74.7 trillion yuan, despite having caused the fire” (He 2012).
decreased by 4.7 percent in the same period of 2010
(Xinhua 2011c). The punishments take place as domestic courier
services “are having to invest to compete in the air freight
Increasingly, e-commerce is a driver for logistics market, in some cases buying their own aircraft” (He
industry development; booming Internet retail sales, 2012).
combined with the above-mentioned policy initiatives,
reportedly achieved sector-wide revenue in excess of 18 Some firms aren’t waiting for domestic delivery
billion yuan in 2009 (A. T. Kearney 2010a). services to increase capacity. “With more Chinese
shoppers going online”, writes The Wall Street Journal,
E-commerce may, in fact, be growing too fast for the “demand for warehouses and parcel delivery services
domestic cargo network to keep up: China Daily reported is [...], far outpacing the development of the country’s
leading up to the Spring Festival in February 2011 that logistics infrastructure” (Osawa 2012).
“major [domestic] private delivery companies, such as
Yuantong and Shentong, decided last week to stop E-commerce giant Alibaba, itself solely responsible
accepting new packages in some cities to ensure parcels for a large slice of daily parcel deliveries, was reported in
in the already-full warehouses are delivered before the 2012 to be “in talks with a few Chinese logistics firms—
Spring Festival”, and that “The phenomena underscored including a warehouse operator and a parcel-delivery
the fact that China’s logistics sector is lagging far behind company—to invest a total of $100 million in them by the
the country’s booming e-commerce market, which has end of [that] year” (Osawa 2012).
258
hugely beneficial for west coast port communities such witnessed explosive growth in recent years” (China Daily
as Los Angeles. As reported in the New York Times in 2007, 2011).
“processing and distributing millions of freight-laden
containers through the region and out to the rest of the More recently, Wal-Mart Asia president and CEO
United States have become the largest source of jobs in Scott Price also fingered China’s inefficient logistics
the region” (Flanigan 2007). infrastructure as the biggest challenge to e-commerce in
the nation, first and foremost “stemming from the lack of
Fuel costs, however, remain a persistent concern for efficient and reliable last-mile delivery” (Xinhua 2012a).
the industry as a whole. It was reported in September
2008 that as a result of the 18 percent increase in diesel On top of that, the State Post Bureau reportedly
and gasoline prices in August of that year, fuel spending enforced its first-ever fine for parcel mishandling against
accounted for 40 percent of total transportation costs. domestic carrier Shentong Express after a video was
Domestic Chinese courier companies, already operating posted online of “workers furiously distributing goods,
on extremely thin margins due to competition with “tens kicking parcels and throwing items to the ground”. The
of thousands of local competitors offering increasingly fine was for 10,000 yuan (approximately $1,500) (Li 2011).
lower charges” have reportedly suffered greatly (China
Daily 2008). More severe punishments have since been handed out:
“[In November 2012], the China Air Transport Association,
Despite fuel cost fluctuations, capital cost hikes, and or CATA, announced it was putting four domestic logistics
potential setbacks contained in the 2009 revision of the firms on its no-fly list because of security flaws, after a fire
Postal Law (see below), many participants in the sector started in a storage bin of a flight that eventually landed
remain optimistic about growth, and with good reason: at Dalian Zhoushuizi Airport in October” (He 2012).
according to the National Bureau of Statistics, between
2002 and 2008 (the last year for which data was available) The four firms, Shanghai YTO, Yunda Express, and
total freight volume has increased from 14.8 billion to 25.8 the Huixing and Qihao courier firms were “forced to
billion tons annually (The National Bureau of Statistics of suspend their air freight services until their business
China 2009). procedures improved”. According to the association,
“Shanghai YTO was blamed for its incorrect classification
Xinhua reported that the total value of goods shipped of lithium batteries, while the other firms were punished
over the first half of 2011 rose by nearly 14 percent for transporting the prohibited article vesuvian, which
year-on-year to reach 74.7 trillion yuan, despite having caused the fire” (He 2012).
decreased by 4.7 percent in the same period of 2010
(Xinhua 2011c). The punishments take place as domestic courier
services “are having to invest to compete in the air freight
Increasingly, e-commerce is a driver for logistics market, in some cases buying their own aircraft” (He
industry development; booming Internet retail sales, 2012).
combined with the above-mentioned policy initiatives,
reportedly achieved sector-wide revenue in excess of 18 Some firms aren’t waiting for domestic delivery
billion yuan in 2009 (A. T. Kearney 2010a). services to increase capacity. “With more Chinese
shoppers going online”, writes The Wall Street Journal,
E-commerce may, in fact, be growing too fast for the “demand for warehouses and parcel delivery services
domestic cargo network to keep up: China Daily reported is [...], far outpacing the development of the country’s
leading up to the Spring Festival in February 2011 that logistics infrastructure” (Osawa 2012).
“major [domestic] private delivery companies, such as
Yuantong and Shentong, decided last week to stop E-commerce giant Alibaba, itself solely responsible
accepting new packages in some cities to ensure parcels for a large slice of daily parcel deliveries, was reported in
in the already-full warehouses are delivered before the 2012 to be “in talks with a few Chinese logistics firms—
Spring Festival”, and that “The phenomena underscored including a warehouse operator and a parcel-delivery
the fact that China’s logistics sector is lagging far behind company—to invest a total of $100 million in them by the
the country’s booming e-commerce market, which has end of [that] year” (Osawa 2012).
258
